By Dean Yates BAGHDAD, Nov 28 (Reuters) - The commander of U.S. prison camps in Iraq said he wants to cut the number of Iraqis in his custody by around two thirds by the end of 2008 as part of a wider counter-insurgency plan to bring down violence.

Most of the more than 25,000 detainees held by U.S. forces are Sunni Arabs accused of involvement in an insurgency against the Shi'ite-led government and American troops. Sunni Arab leaders say many are innocent and are being held without charge.

The issue of detainees in both U.S. and Iraqi jails is one of the most sensitive in the country, especially as detentions have spiked during a security crackdown this year.

The crackdown, which includes an extra 30,000 U.S. troops, is meant to buy time for Iraqi leaders to reach legislative benchmarks aimed at reconciling majority Shi'ites and minority Sunni Arabs and so stop a slide towards sectarian civil war.

Major-General Douglas Stone, head of U.S. detention facilities in Iraq, said on Tuesday he had given a proposal to the U.S. commander in Iraq, General David Petraeus, to sharply cut the detainee population in U.S. custody by the end of 2008.

"We are looking at a number that is in the sub-10,000 or 8,000 level for real difficult, challenged guys. The rest of them we think we can work through and get out," Stone told Reuters at Camp Bucca in southern Iraq, the U.S. military's largest detention camp in the country.

The fate of Iraqi detainees has been a flashpoint since 2004, when pictures emerged of U.S. jailors abusing naked detainees at the Abu Ghraib prison near Baghdad.

Critics say only a small proportion of those held are ever prosecuted and convicted. The U.S. military contends those still in custody are there because they pose a security risk.

COUNTER-INSURGENCY A counter-insurgency plan adopted by Petraeus this year to combat al Qaeda and Shi'ite militias in Iraq includes the "surge" of extra troops and the new strategy of moving troops out of large bases into smaller outposts to live among Iraqis.

U.S. commanders are also stepping up efforts to rid Iraqi security forces of militia influence and improve their training so they can eventually take over from U.S. troops.

With violence declining in recent months, Petraeus has announced he plans a gradual drawdown of more than 20,000 troops by July 2008. There are about 162,000 U.S. troops now in Iraq.

Stone has introduced schooling programmes, job training and religious instruction with moderate imams in U.S. detention facilities since he took over in May, saying it was the first time counter-insurgent tactics had been used in his field.

Attacks across Iraq have fallen by 55 percent since the "surge" was fully deployed in mid-June but U.S. commanders warn that overall levels of violence are still too high and that al Qaeda and Shi'ite militias could be expected to change tactics.

The U.S. military said a female suicide bomber wounded seven U.S. soldiers and five Iraqi civilians when she detonated an explosives-packed vest in volatile Baquba, 65 km (40 miles) north of Baghdad, on Tuesday. Such attacks by women are rare.

Nine people were killed in an attack by a suicide bomber posing as a shepherd in Baquba on Tuesday.

Encouraged by the lull in violence, thousands of Iraqis have begun returning to their homes after escaping the violence to neighbouring Syria and Jordan.

Government spokesman Ali al-Dabbagh told a news conference that about 350 families would return from Damascus on a convoy of buses later on Wednesday. He said each family would receive 1 million Iraqi dinars (about $800) in resettlement assistance.

Security spokesman Brigadier-General Qassim Moussawi said work would begin next week to remove some concrete barriers -- a familiar part of Baghdad's landscape -- as part of a plan to reopen streets that were closed at the height of the violence. (Writing by Paul Tait)

AlertNet news is provided by